Over recent years there has been an increasing interest in the academic, institutional and market analyst community to monitor the developments of the commercial property markets for manifold reasons. In the first place, like the residential units the commercial premises show a key role as collateral in the provision of funds by financial intermediaries, thus enhancing the interdependence between the real and financial sectors at the macro level. From this standpoint, both aggregate cycles and financial stability conditions may be heavily affected by the developments in the real estate sector. The correlation between the two economic pillars has apparently increased over time, and it shows up even stronger during the episodes of the financial crisis. In the second place, unlike residential property, which enters the household’s utility function as it provides accommodation to its owners, thus receiving an intrinsic reservation value, the price of commercial property is mostly determined by the expected value of future rents. Accordingly, the demand for commercial property is more likely to be affected by the business environment and economic confidence. In addition to some specific characteristics of the commercial compared with the residential property (such as longer construction lags, longer leases and different funding methods), this aspect may cause distinct cyclical behavior in the two segments of the real estate market, as well as different channels to interact with the financial system and the real economy (ECB, 2000; Davies and Zhu, 2005, Panetta et al. 2010).

In the third place, banks may play a larger role in the financing of commercial than residential real estate, as they lend for the purchase of land for development and existing buildings, they finance construction projects; they lend to non-financial firms based on real estate collateral; moreover the cross border holding of commercial assets by banks is by large higher compared with residential assets, showing an increasing pattern in recent years. As a consequence, a declining trend in commercial prices may exert stronger and more geographically widespread effects on the macroeconomic dynamics and the stability conditions of the financial system.